If the absolute value of the price elasticity of demand for a product is 2, and the price of a product increased 10 percent, then the quantity demanded will decline by
A) 20 percent.
B) 10 percent.
C) 5 percent.
D) 2 percent.

Question

Quizplus · Accepted Answer

The formula for calculating the percentage change in quantity demanded is:
Percentage change in quantity demanded = (Price elasticity of demand) x (Percentage change in price)
Given,
Absolute value of price elasticity of demand = 2
Percentage change in price = 10%
Using the formula above,
Percentage change in quantity demanded = 2 x 10% = 20%
Therefore, the quantity demanded will decline by 20% when the price increases by 10%, making option A the correct answer.

If the Absolute Value of the Price Elasticity of Demand